What is Balassa index?
The Balassa index measures the degree of specialisation of Dutch export products. If the Balassa index for a product is more than 1, it means that product involves specialisation. If it is less than 1 it means that no specialisation is involved in the product.
What is a revealed comparative advantage index?
The revealed comparative advantage is an index used in international economics for calculating the relative advantage or disadvantage of a certain country in a certain class of goods or services as evidenced by trade flows. It is based on the Ricardian comparative advantage concept.
Why is comparative advantage the basis for trade?
Comparative advantage is an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners. Comparative advantage suggests that countries will engage in trade with one another, exporting the goods that they have a relative advantage in.
How do you measure export competitiveness?
The price of a given country’s competitors on the American market is determined by the pattern of supply (output plus imports) on that market. The price of the country’s competitors on all of its markets is then obtained by aggregating its competitors’ prices on each market according to the pattern of its exports.
What is RCA value?
Definition: The RCA index is defined as the ratio of two shares. The denominator is share of world exports of the same commodity in total world exports. Range of values: Takes a value between 0 and +∞. A country is said to have a revealed comparative advantage if the value exceeds unity.
What does the Heckscher Ohlin theory explain?
The Heckscher-Ohlin model is an economic theory that proposes that countries export what they can most efficiently and plentifully produce. The model emphasizes the export of goods requiring factors of production that a country has in abundance.
How do you measure comparative advantage?
To calculate comparative advantage, find the opportunity cost of producing one barrel of oil in both countries. The country with the lowest opportunity cost has the comparative advantage.
What is SHI and RHI in trade?
Regional Hirshman Index (RHI) and SectoralHirshman Index (SHI) will be applied to measure the diversification of India’s export markets and products.
What are the benefits of comparative advantage?
The benefit of comparative advantage is the ability to produce a good or service for a lower opportunity cost. A comparative advantage gives companies the ability to sell goods and services at prices that are lower than their competitors, gaining stronger sales margins and greater profitability.
What is export competitiveness index?
The index calculates the level of competitiveness and diversification of a particular export sector using comparisons with other countries. In particular, it brings out gains and losses in world market shares and sheds light on the factors causing these changes.
How do you evaluate competitiveness?
Competitive advantage is measured with market (i.e. Existing) prices, while the comparative advantage should be measured by equilibrium (i.e. unobserved) prices. Government intervention may change the competitiveness superficially without increasing real competitiveness.